Digital transformation for chiefs and owners. Volume 2. Systems thinking. Dzhimsher Chelidze

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      The organizational structure is the basis for the management system. It achieves the company’s goals by providing resources to needed people and delineating areas of responsibility.

      Additionally, when you have new technologies, changing goals, the company «matures» and moves to a new level, then business processes with organizational structure should change.

      A clear and visualized organizational structure is a MUST. In my practice, there has never been a single case of a company operating smoothly without the organizational structure described, accessible and understandable to all.

      Most often I observe the following:

      1. There is no organizational structure. This is acceptable if you are 2—3 people, you are a strong manager and you have a strong team, you know how to negotiate among themselves. Otherwise, it is a realm of chaos. Even if you have the processes described.

      2. The organizational structure is on paper, but in life quite differently. As they say, «waiting is reality».

      3. There is an organizational structure, but it has no information about functions, powers, responsibilities. It’s not synchronized with the company’s goals, it’s not confined to team-building.

      You can work without a description of business processes, but if there is a clear structure, with a description of functionality, key indicators and target product, it allows to radically improve efficiency and productivity, to establish a team relationship. Here the business processes described will allow to achieve even more efficiency, and subsequently to engage in automation and digitalization.

      However, the business processes described will not work without a clear and understandable organizational structure, because you will not have a skeleton.

      Types of organizational structures

      It is now customary to identify several types of organizational structures:

      – linear;

      – functional;

      – linear-functional or linear-stacked;

      – divisional;

      – market;

      – matrix;

      – food.

      We’ll tear down each of them.

      Linear

      The simplest model: straight and hierarchical. Key decisions are made from the top, and they go down without any separate functions: sales, marketing, production. Suitable for small companies with simple manufacturing technology and minimal need for additional features.

      LINEAR

      Pros:

      – simplicity and speed of management decision-making;

      – quick reaction to instructions and orders;

      – a clear allocation of responsibilities and responsibilities;

      – discipline.

      Cons:

      – overload of managers;

      – concentration of a large amount of non-core work on managers;

      – weak relationships between the performers;

      – with the growth of the organization, the number of management levels increases rapidly, which reduces the flexibility of the company and the speed of response to changes.

      Functional

      The division of responsibilities is based on the functions performed: production, sale, marketing, accounting and tax accounting, financial management. At the end of the day, everyone takes his own direction. Optimal for small companies that work with one product, but require already more complex production organization.

      FUNCTIONAL

      Pros:

      – narrow specialization of directions – increase of productivity and quality;

      – a clear allocation of responsibilities;

      – exempting line managers from functions outside their competence;

      – no duplication of functions (if business processes are built).

      Disadvantage – the larger the company and the larger structure, the more difficult it is to organize the division and communication between the departments, while retaining the team interaction. Bureaucracy is beginning to flourish.

      Linear-functional

      The combination of distribution of linear and functional problems. In line management, there are production units where the manager is responsible for everything and support functions are performed by functional managers.

      An example is a production hall with a technical director who is responsible for the work and discipline of the staff, the state of technology, productivity – in general, for everything. At the same time, there is a management apparatus, headquarters, where all support functions are carried out: procurement, search for contractors, travel arrangements and so on.

      It is the most common among medium and large organizations, where people from a few hundred to a couple of thousand. Optimum in a stable environment: standard production processes, stable demand and external environment, without the need to implement a large number of projects and create new products.

      LINEAR-FUNCTIONAL

      Pros:

      – narrow specialization of directions – increase of productivity and quality;

      – the ease and speed of managerial decision making;

      – quick reaction to instructions and orders;

      – minimizing duplication of work.

      Disadvantages:

      – high, sometimes unjustified, administrative staff costs;

      – the growth of bureaucracy when functional managers are more interested in their security than in overall success.

      Divisional / Market / Grocery

      Similar to the linear structure, but the divisions are structured according to the principles of product or market separation. Optimal for companies with a large number of markets and heterogeneous products. For such enterprises it is necessary to create individual basic business processes for each product / region: supply, production, marketing, sales.

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